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Building the Saudi Automotive Cluster

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Diversifying the Saudi Industrial Base, Building an Automotive Cluster
Eng. Azzam Shalabi, President, National Industrial Clusters Development Program
Event - Saudi Arabia: New Auto Market Hub for the Middle East, Africa and South Asia
Presented June 26, 2013
www.ic.gov.sa

Published in: Automotive, Business

Building the Saudi Automotive Cluster

  1. 1. 1 www.ic.gov.sawww.ic.gov.sa
  2. 2. 2 www.ic.gov.sa National Industrial Vision
  3. 3. 3 www.ic.gov.sa Industrial Clusters Program assigned by the Council of Ministers to attract automotive industry investments Objectives include: 1. Building a sustainable & globally competitive Cluster 2. Developing anchor OEM & key supplier projects 3. Facilitating start up of OEM, supplier & service businesses 4. Enabling environment for the Cluster to compete globally A focal agency for automotive companies
  4. 4. 4 www.ic.gov.sa 50,000 vehicles Phase I Phase II Phase III Phase IV 150,000 vehicles 300,000 vehicles 400,000 vehicles A sustainable automotive cluster competitively serving the needs of fast growing regions
  5. 5. 5 www.ic.gov.sa The Saudi Cluster has a unique value proposition Auto Cluster AutoZone Materials Infra- structure Human capital Market
  6. 6. 6 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  7. 7. 7 www.ic.gov.sa Vehicle Manufacturing, Development & Engineering Manufacture Components & parts OEMsSuppliers Industrial Clusters Program Universities, training, services, utilities, logistics… Forging “Development Partnerships” with companies Basic Materials Metals & Plastics MARKETS IMPORTS AutoZone Authority Auto Cluster AutoZone Materials Infra-structure Human capital Market
  8. 8. 8 www.ic.gov.sa Projects benefit from attractive incentives Auto Cluster AutoZone Materials Infra-structure Human capital Market 1. AutoZone with phase 1 infrastructure investments ~ $400 million i. Industrial land & factory building lease at highly competitive terms ii. Utilities at competitive terms 2. Public Private investment company “AutoCo” ~ $300 million capital i. Invest in anchor projects in partnership with OEMs & qualified suppliers 3. Human Capital development incentives i. Auto Academy investment ~ $70 million ii. Wage & training financial incentives for Saudi employees 4. Financial & Fiscal incentives i. Industrial loans at highly competitive terms ii.Export finance & insurance at competitive terms iii. Import duty exemption for machinery, material & components iv. Flat corporate tax @ 20% with losses carry forward
  9. 9. 9 www.ic.gov.sa  New Vehicle & Truck projects • Isuzu 25,000 annually commercial vehicles - started 2012 • Jaguar Land Rover – LOI signed 2012 Auto Cluster is making steady progress Auto Cluster AutoZone Materials Infra-structure Human capital Market  New Parts & Components projects • PCC Small plastic parts - start operations 2013 • PCC Under the hood Nylon parts - start operations 2013 • Aluminum & steel stamping - LOI signed 2013 • Large Plastic parts - LOI signed 2013 • Aluminum casting - LOI signed 2013 • Seat and harness - LOI signed 2013 LOI – Letter of intent
  10. 10. 10 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  11. 11. 11 www.ic.gov.sa The AutoZone conceived with OEM input Auto Cluster AutoZone Materials Infra-structure Human capital Market  AutoZone concept developed with Oliver Wyman consulting firm  Targets are significant reduction in investment & unit cost for companies  Concept was tested with 4 global OEMs in 2012  OEM feedback was incorporated in the latest AutoZone concept
  12. 12. 12 www.ic.gov.sa Auto Cluster AutoZone Materials Infra-structure Human capital Market OEMs Zone InfrastructureShared Facilities & Services Suppliers & Services • Developed plots • Utilities hook up at the plot • Roads and highway network • Connectivity to ports & airport • Auto Academy • University • Vocational training • Bonded Zone • Business park • Civic & security services • People & products transportation • Housing & Recreation • International & Saudi Schools • Hospital and clinics • Retail centers • Hotels • Alum & Steel Stamping • Large Plastic parts • Supplier “condo” • Lease factory buildings • Central Logistics • Shared technical services • Testing and test track Community Living • Body • Painting • General Assembly • Quality The AutoZone ~ 10 million square meters Innovative AutoZone maximizing shared processes, facilities and services
  13. 13. 13 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  14. 14. 14 www.ic.gov.sa Auto Cluster AutoZone Materials Infra-structure Human capital Market Local key basic materials are a competitive advantage for the Cluster Petrochemicals & Plastics Clusters Jeddah Riyadh Arar Tabuk Sakakah Hail Buraydah Madinah Abha Makkah Najran Ras al KhairAz Zabirah Baha Al Amar Damman Jubail Rabigh Jazan Yanbu Metals Clusters Maaden Alcoa Aluminum Complex • Mine to Auto sheet • Aluminum sheet series 5 & 6 • Liquid Aluminum for Auto cast products Sabic Hadeed Steel Complex • Cold Sheet for automotive Plastics & Chemicals (selected few) • Polypropylene • Elastomers • ABS • Polycarbonate • Nylon 66 • Polyurethane • Carbon Fiber • Carbon black • Adhesives
  15. 15. 15 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  16. 16. 16 www.ic.gov.sa The Land bridge Railway 2020 • passengers and cargo GCC railway 2017 • passengers and cargo North-South railway 2014 • passengers and cargo Haramain high-speed rail 2014 • passengers Haramain high speed rail Land bridge railwayExisting network Dammam Madinah Riyadh Jazan Hail Jeddah Yanbu Rabigh Korayat Haditah Hazam Al-Jalamid Raz Al Khair Jubail Makkah Abu Dhabi Dubai Fujairah Sohar Muscat Duqm OMAN UAE KUWAIT North-south railway GCC Railway Yemen Salalha Abu Hadriyah Auto Cluster AutoZone Materials Infra-structure Human capital Market Major rail projects significantly improve logistics
  17. 17. 17 www.ic.gov.sa Jeddah Yanbu KAEC King Fahed Industrial Port, Yanbu Jeddah Islamic Port King Abdullah Economic City Port Number of Berth by Type 7 including 2 container & 1 Ro-Ro 62 including 11 container &10 Ro-Ro 2 including Ro-Ro Throughput, 2011 (tons m) 33.7 52.04.5 (20 target) Containers 2011 (tons m) 0.4 41.20.0 Ro-Ro, 2011 (tons m) 0.0 1.30.0 West coast SOP 2013 Auto Cluster AutoZone Materials Infra-structure Human capital Market Sea Ports provide efficient & cost effective import export operations
  18. 18. 18 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  19. 19. 19 www.ic.gov.sa 7.90 Saudi Labor Force 4.70 Saudi Labor Population (age 15 and over) 12.55 Saudi Population 19.40 Saudi Labor Force 2024 33% 7% 9% 52% SAUDI POPULATION & NATIONAL LABOR FORCE, 2011, [million] SAUDI LABOR FORCE FORECAST BY LEVEL OF EDUCATION, 2024, [%] High-school Graduates Diploma Graduates University Graduates Below High-school 2011 2024 Auto Cluster AutoZone Materials Infra-structure Human capital Market A Well educated Labor Force is the source for the Cluster long term competitiveness
  20. 20. 20 www.ic.gov.sa • High Institute of Plastic Fabrication • High Institute for Elastomer Industries • High Institute for Metals Technology • Auto Academy Specialized training institutes preparing Saudi talent to work in Auto Cluster • SABIC & SPDC of Japan • Akron university • Under development • Under development Operator Auto Cluster AutoZone Materials Infra-structure Human capital Market
  21. 21. 21 www.ic.gov.sa Auto Cluster AutoZone Materials Infra- structure Human capital Market
  22. 22. 22 www.ic.gov.sa 714 880 1005 1,543 1,962 2,292 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2012 2016 2021 652 771 844 1,407 1,718 1,923 2,059 2,490 2,767 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2012 2016 2021 Saudi (Minimum) MENA without Saudi (Minimum) Saudi (Maximum) MENA without Saudi (Maximum) 3,298 2,840 2,257 MENA Market • 2.8 - 3.3 million vehicles annually • 67% dominance by Japanese & Korean imports • 41% C & D segments • 20% SUVs Auto Cluster AutoZone Materials Infra-structure Human capital Market Robust growth in MENA region is a significant opportunity for Cluster companies Thousand units per year
  23. 23. 23 www.ic.gov.sa Moving Forward • Saudi Auto Cluster is a unique opportunity with a long term horizon • Collaboration between Government and Companies in building the Cluster • Companies can benefit from the advantages for early movers • Industrial Clusters Program devoted to work with you to explore opportunities
  24. 24. 24 www.ic.gov.sa Download the Industrial Investor Guide www.ic.gov.sa
  25. 25. 25 www.ic.gov.sa The Kingdom of Saudi Arabia Your Contact: Abdallah Al-Hazani Mobile: +966 505284005 Email: abdallah.hazani@ic.gov.sa Saudi Arabia, land of opportunities

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